IN THE FEDERAL COURT OF AUSTRALIA NG 118 of 1996 NEW SOUTH WALES DISTRICT REGISTRY NG 445 of 1995 BETWEEN: COMMISSIONER OF TAXATION Applicant AND: MACQUARIE HEALTH CORPORATION LIMITED First Respondent BUSINESS AND PROFESSIONAL LEASING PTY LTD Second Respondent RYNDALE PTY LTD Third Respondent SARZANA HOLDINGS PTY LTD Fourth Respondent RICHARD WALTER PTY LIMITED (IN LIQUIDATION) Fifth Respondent AT HOLDINGS PTY LTD Sixth Respondent MORLEA PROFESSIONAL SERVICES PTY LTD Seventh Respondent JUDGE: EMMETT J DATE: 19 AUGUST 1998 PLACE: SYDNEY EX TEMPORE REASONS FOR JUDGMENT HIS HONOUR: The cross claimant on the first cross-claim seeks leave to amend the first cross-claim. The amendments are designed to raise issues which are based on alleged insolvency of the Taxpayer at all times since December 1991, or alternatively since March 1995. It is contended that the service of the section 218 notices constituted a transaction which would be capable of being avoided if it occurred while the Taxpayer was insolvent. The details of that argument have been advanced in submissions to date and I will not restate them at this stage. The cross-claim as it presently stands asserts that at all times since 20 November 1996 the Taxpayer has not been able to pay its debts as and when they became due and payable. That allegation was admitted by the Commissioner in his defence to the cross-claim. However, while there is some evidence in the proceedings to date which suggests that the Taxpayer may have been insolvent from 1991, that has never been an issue in the proceedings. The Commissioner opposes the amendment on the basis that it has been brought very late in the conduct of the proceedings and that it would require a fairly extensive investigation and examination by the Commissioner of the financial affairs of the Taxpayer from 1991 to 1996. It would be impossible for that investigation to be carried out in a short time. It would therefore be necessary for the proceedings to be adjourned if the amendments were allowed. I would not be disposed to allow the amendment if it was necessary to adjourn the proceedings. The hearing of these proceedings has already been vacated once. The costs which would be thrown away by such an adjournment would be significant although it may be possible to continue with the argument on issues that are not affected by the proposed amendment. On the other hand, I am reluctant to deprive the liquidator of legitimate arguments which he would be obliged to bring in the interests of the creditors generally. It seems to me that a course is open to me which will accommodate the interests of both parties. That course is to allow the amendments, subject to appropriate terms concerning any prejudice by reason of delay and to order, pursuant to Order 29, that all issues raised by the allegation of insolvency prior to 20 November 1996 be determined separately from and after determination of all other issues in the proceedings. Accordingly, I propose to allow the amendment but I will defer, on the basis I have just indicated, the determination of the issues of insolvency raised by the proposed paragraph 7. I have in mind that it would be possible to determine the legal questions which arise from the liquidator's contentions on the assumption that, in due course, he may be able to make out the factual matters alleged concerning insolvency. If I resolve those legal questions favourably to the Commissioner, then it would not be necessary to embark on the further inquiry as to the financial position of the Taxpayer prior to 20 November 1996. If it does become necessary to embark on such an inquiry and that has the effect either of postponing the time when the Commissioner might otherwise be entitled to funds that have been paid into court or of depriving the 6th and 7th respondents of funds, it would be necessary for terms to be imposed on the Taxpayer which would compensate the other parties for that delay. I propose to defer, for the moment, ruling on the amendment and to direct the Taxpayer to bring in short minutes of appropriate orders to reflect what I have indicated in general terms in the course of these reasons. I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett Associate: Dated: 19 August 1998 Counsel for the Applicant: G.A.A. Nettle QC with M. Gordon Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondents: D.J. Hammerschlag with M. Green Solicitor for the First to Fourth Respondents: Teece Hodson & Ward Counsel for the Fifth Respondent: P.L. Dodson Solicitor for the Fifth Respondent: Blake Dawson Waldron Counsel for the Seventh Respondent: R.B.S. Macfarlan QC with D.L. Williams Solicitor for the Seventh Respondent: Alan Jessup Date of Hearing: 19 August 1998 Date of Judgment: 19 August 1998